Jersey Unreported Judgments

[2009]JRC040

royal court

(Samedi Division)

3^rd March 2009

Before     :		J. A. Clyde-Smith, Esq., Commissioner and Jurats Morgan and Liddiard.
Between	Geoffrey George Crill, as executor dative of the will of the late Duncan Philip Sebastian Hickman		Representor
And	(1) Alpha Asset Finance (CI) Limited
	(2) Messrs Baker Platt
	(3) Barclays Private Clients International Limited
	(4) Belgravia Financial Services Group (in liquidation)
	(5) Close Financial (CI) Ltd t/a Equipment Rental
	(6) Esplanade Jersey Limited
	(7) Gallichan Marine Limited
	(8) Gillian Mary Hickman
	(9) Sebastian Hickman, by his Tuteur Advocate David Le Quesne
	(10) Mark Howe
	(11) NatWest Mastercard
	(12) SP de la Haye t/a Thrones Luxury Loos
	(13) Vibert Marquees Limited
	(14) Messrs Viberts
	(15) Deborah Jane Hemaya (née Hickman)
	(16) Peter McEvoy
	(17) Nicolette McEvoy
	(18) Ronald Leslie Mitchell		RESPONDENTS

Advocate P. D. James for the Representor

Advocate F. B. Robertson for Esplanade (Jersey) Limited

Advocate R. J. Michel for Close Finance (CI) Limited t/a Equipment Rental Finance

Advocate D. M. Cadin for Belgravia Financial Services Group

Advocate P. M. T. Sinel for Barclays Private Clients International Limited

Advocate D. S. Steenson for Alpha Asset Finance

Gillian Hickman was present in person

Advocate D. F. Le Quesne as Tuteur of Sebastien Hickman

Advocate A. D. Hoy for Mr and Mrs McEvoy

Advocate S. J. Young for Mr R Mitchell

Advocate D. E. Le Cornu for Deborah Hemaya

judgment

the commissioner:

1.        On 29^th January, 2009, the Court ratified a procedure proposed by the representor (to whom we will refer hereafter as "the executor") to enable him to deal with the claims of the creditors of the personal estate of the late Duncan Philip Sebastian Hickman ("Mr Hickman"), who died on 2^nd May, 2008, domiciled in Jersey.

2.        The personal estate of Mr Hickman is insolvent.  There are some 14 known creditors with claims totalling £7,048,801.42 and assets available to the executor totalling £1,695,000.  These figures are provisional.

3.        Under the provisions of Article 4(2) of the Bankruptcy (Désastre)(Jersey) Law 1990 ("the Bankruptcy Law") no application can be made to have an insolvent estate made the subject of a "désastre".  As made clear in Jersey Insolvency & Asset Tracing by Anthony Dessain and Michael Wilkins, 3^rd Edition at paragraph 5.2.3.3:-

"The administration of the insolvent estate of a deceased person will be carried out pursuant to the common law and to the Probate (Jersey) Law 1998, effective from January 1999".

The Probate (Jersey) Law 1998 has been engaged to the extent that the representor has been appointed executor dative but there are no other provisions of the Probate Law or the Probate (General) Rules 1998 which relate to the administration of an insolvent estate.  We were informed that no guidance is to be found in the customary law of the Island on the administration of such an estate and that there is no case law to assist.

4.        The issue which arises for the executor relates not to the gathering in and realisation of the assets of the personal estate but to the procedure he should adopt in dealing with the competing claims of the creditors.

5.        To that end, all of the known creditors of the personal estate have been convened to these proceedings and the executor has put forward a procedure modelled on that set out in the Bankruptcy Law  and the Bankruptcy (Désastre) Rules 2006 ("the Bankruptcy Rules").

6.        It is clear that it is in the interests of all of the creditors that their claims should be administered in a manner which is fair and which will ensure equality between them, subject to those claims which have preference in law.  Accordingly, although Mr Sinel expressed some reservation as to whether the Court had the requisite power, all of the creditors were supportive of a procedure being established and were in substance in agreement with the procedure put forward by the executor, which is appended as a Schedule to this judgment.  The essential features of the proposed procedure are:-

(i)        A notice will be published requiring creditors to file their claims within a specified date.

(ii)       Failure to file a claim by that date will lead to forfeiture of a creditor's right to participate in the distribution of the personal estate.

(iii)      Creditors will be able to inspect claims and file oppositions.

(iv)      The executor will examine the claims and any oppositions and either admit or reject the same.

(v)       A creditor dissatisfied with the decision of the executor to either reject a claim or opposition to a claim can apply to have the decision reviewed by the Court.

(vi)      Following determination of the claims the executor will serve the draft accounts on the creditors and apply to Court for the accounts to be approved and the realised assets distributed.

7.        A number of points arose which require comment.

Forfeiture of claims

8.        It is our understanding (no authority being cited) that ordinarily a creditor has a year and a day from the date of probate to file his or her claim with the executor.  The issue arose as to whether the Court had the inherent power, and if so, whether it was fair to close the door on creditors who do not file their claims with the executor within the deadline which will be specified in the public notice under the proposed procedure, bearing in mind that this deadline will occur sometime before the expiration of a year and a day from probate.

9.        Although the inherent power of the Court to so provide was not the subject of a fully considered debate at the hearing, we are satisfied that the Court does have the inherent power to make such an order.  It is no different from the inherent power exercised by the Court in the 19^th century when creating and subsequently developing the procedure "du désastre". Quoting from Traité du Droit Coutumier de L'Ile de Jersey by Le Gros at page 75:-

" Le Désastre est une procédure qui a pour but d'établir l'égalité entre les créanciers d'un débiteur insolvable dans la distribution de ses biens mobiliers après paiement des préférences accordées.  Il tire son origine d'un acte de la Cour Royal du 4 Mai, 1811, Ex. que nous reproduisons ici :

' Plusieurs actions ayant été évoquées vers Mr Thomas Le Maistre, et ayant été en même temps représenté à la Justice que les affaires dudit Thomas Le Maistre sont en désastre, la Cour, dans la vue de donner l'occasion à tous les créanciers dudit Thomas Le Maistre d'instituer leurs  actions sous la même date, pour entrer en concurrence ensemble sans donner de préférence à aucun, a remis ces causes au 18^e jour du mois courant, et a ordonné que le pré que le présent acte sera publié par l'Officier au lieu ordinaire, et attaché à la porte de la Cohue Royale, afin que toutes personnes puissent en avoir connaissance.' "

10.      Those creditors who failed to bring their actions on the date specified forfeited their right to participate in the distribution.  The requirement to file claims by the published date under the désastre procedure is now encapsulated in Rule 3(5) of the Bankruptcy Rules which provides that a creditor who does not submit a claim within the time fixed by the Viscount forfeits his or her right to participate in the distribution of the assets.  That requirement is subject to the power of the Viscount under Rule 10 to extend the time required.

11.      We see no reason why there should be any difference in the treatment of creditors of a living debtor who is insolvent and creditors of a debtor who has died insolvent.  It is in the interest of creditors of both that claims should be adjudicated upon and the assets of the debtor or his estate realized and distributed as quickly as possible. To that end creditors who wish to participate must file their claims in early course.

12.      Keeping the door open to creditors of an insolvent estate for the period of one year and a day following probate would mean that no distribution could be made during that period.  In addition to the general prejudice to creditors caused by such delay, it would in particular be to the prejudice of creditors whose claims do not bear interest.  The point is of particular significance in this case where the executor is predominantly holding cash which, with the current low interest rates, is producing a minimal return and there are creditors with substantial claims that carry high rates of contractual interest.  With each week that passes, the funds available for the creditors who have no claim to interest reduces.  Furthermore, failure to ascertain definitively and in early course the creditors who can participate prevents the executor from reaching agreement with the creditors on any issues which may arise such as in relation to the realization of assets. 

13.      Thus we conclude that the Court has the power and it is fair for the door to be closed on creditors who do not file their claims within the period that will be specified by the executor in the public notice.  It should be noted however that under the proposed procedure the executor is given the same powers as the Viscount to extend time (clause 15).  It will be open therefore to the executor to extend time in favour of any particular creditor in an appropriate case.

Role of the executor

14.      The proposed procedure gives the executor a similar role to that of the Viscount under the Bankruptcy Law in adjudicating on claims.  At the hearing, the Court raised for discussion whether the executor might have that burden somewhat alleviated by being equated to a trustee seeking directions.  The executor would collate claims, reach a provisional view and then apply to Court for directions, convening the creditors.  We were persuaded, however, by Mr Cadin's argument that such a procedure would be both unwieldy and costly, with each creditor being entitled to address the Court on the claims of the others.  The benefit of the procedure proposed is that it is only a dissatisfied creditor who can apply to the Court.  Such an application would involve that creditor and the executor only.  It would be made at the creditor's risk as to costs.  In other words, it will impose a level of financial discipline upon the creditors that would be both beneficial and desirable.

Executor's liability

15.      Under clause 13 of the proposed procedure the executor's liability in respect of his duties under the procedure is limited to acts or omissions made in bad faith or with wilful default or gross negligence.   The procedure as originally drafted by the executor exonerated him from all liability in relation to his duties under the proposed procedure unless it was proved that he was acting in bad faith, which is consistent with the limitation on the Viscount's liability under Article 48 of the Bankruptcy Law.  To that Bedell Cristin added wilful default or gross negligence. 

16.      The issue arose as to whether it was appropriate to limit the executor's liability in this way bearing in mind he is a paid professional and, in particular, whether it was appropriate for him to be exonerated from liability for ordinary negligence.  We reached the conclusion that the clause should remain as amended by Bedell Cristin for the following reasons:-

(i)        The proposed procedure imposes a burden which extends beyond that which executors ordinarily undertake.

(ii)       We were mindful of the public interest in not discouraging professional persons from agreeing to take on the administration of insolvent estates, a task which otherwise might fall upon the Viscount to undertake.

(iii)      It had been put forward by one of the major creditors and is limited in its application to the executor's duties under the proposed procedure and not to his other duties as executor.

Interest

17.      The draft prepared by the executor followed Article 29(1)(2) of the Bankruptcy Law which provides that where a debt bears interest, it can only be claimed to the date of the declaration (or in this case, the date of death of Mr Hickman).  Although this provision would appear to be consistent with the position under customary law, it would have been contested by those creditors who had such claims and Mr James did not pursue the point.  The matter was therefore not argued and the provision deleted.

Executor's Fees

18.      Mr Sinel proposed that the executor should give the creditors 14 days' notice of his intention to recover his fees with a full breakdown of those fees and if twenty five per cent or more of the creditors objected then such fees would be subject to taxation before the Judicial Greffier.

19.      We rejected that proposal.  The presumption is that the executor will act in accordance with his duties and that his fees will be both reasonable and properly incurred.  We are mindful of the cash flow requirements of any professional firm and regard it as unacceptable to subject the executor to a judicial process before he can recover his fees.  A creditor who considers that the executor has acted unreasonably or improperly and ought not to be able to recover his fees has the usual remedies available for an alleged breach of the executor's duties.

Authorities

Bankruptcy (Désastre)(Jersey) Law 1990.

Jersey Insolvency & Asset Tracing, by Anthony Dessain and Michael Wilkins, 3rd Edition.

Probate (Jersey) Law 1998.

Probate (General) Rules 1998.

Bankruptcy (Désastre) Rules 2006.

Traité du Droit Coutumier de L'Ile de Jersey by Le Gros.

SCHEDULE

PROCEDURE FOR DETERMINATION OF CLAIMS

 

1. FILING OF CLAIMS

(a) Following an order of the Royal Court ratifying this procedure ("the Order of Court") the Executor:-

(i) must, with the least possible delay, cause a notice to be published in the Jersey Gazette; and

(ii) may cause a notice to be published in any other way the Executor thinks fit.

(iii) shall give notice to each of the convened parties.   

(b) The notice must:-

(i) require each creditor to file with the Executor a statement that contains full particulars of the creditor's claim (a "proof"); and

(ii) specify the date by which claims are to be filed, being a date that is not less than 21 days after the date of the notice ("the Closing Date").

(iii) state that any creditor who does not submit a claim within the time specified in the notice pursuant to 1(b)(ii) shall forfeit his or her right to participate in the distribution of the estate.

(iv) state that the notice is given by order of the Royal Court.  

(c) A creditor who believes that an amount due to the creditor ranks for payment in priority to any other debt must so claim.

(d) A creditor who believes he or she has a surety ("caution"), guarantee, hypothec, security interest or other charge affecting the property of the debtor must so claim.

(e) A creditor who does not submit a claim within the time fixed by the Executor in accordance with paragraph 2(b) above forfeits his or her right to participate in the distribution of the Estate.

(Any respondent to the notice published pursuant to paragraph 1(a)(i), 1(a)(ii) and 1(a)(iii) is hereinafter referred to as a "Creditor".)

2. CONFIRMATION OF CLAIMS; FILING OF REVISED CLAIMS

All claims that have been notified to the Executor as set out in Schedule 2 shall be deemed to have been filed on or before the Closing Date.[1]  Should any Creditor wish to make any amendment to the claim which has already been notified to the Executor it shall deliver an amended claim in writing to the Executor on or before 5.00pm on the Closing Date.

3. EVIDENCE IN SUPPORT OF CLAIMS

Notwithstanding any documentation or other evidence which may already have been provided to the Executor or of which he may otherwise be aware, every Creditor shall on or before the Closing Date deliver to the Executor all documents and other evidence in its possession, together with details of any evidence it believes does or may exist and upon which it wishes to rely but which it cannot obtain and the reason for its belief as to the existence of that evidence and why it cannot be obtained.

4. CLAIMS FOR PREFERENCE

(a) Notwithstanding anything which it may already have indicated to the Executor, if any Creditor believes that the whole or any part of its claim ranks for payment in priority to any other claim or that it has a surety, guarantee, hypothec, security interest or other charge affecting or interest in any of the assets of the Estate (a "Claim for Preference") it shall on or before the Closing Date provide to the Executor full details in writing and all evidence in its possession, together with details of any evidence it believes does or may exist and upon which it wishes to rely but which it cannot obtain and the reason for its belief as to the existence of that evidence and why it cannot be obtained.

(b) If notice of any Claim for Preference shall not have been received by the Executor by 5.00pm on the Closing Date such claim shall be deemed to have been waived.

5. PROVABLE DEBTS

(a) All debts and liabilities, present or future, or contingent, to which Mr Hickman is subject at the date of his death, or to which Mr Hickman becomes subject before payment of the final dividend by reason of any obligation incurred before the date of his death, shall be debts provable in the distribution of the Estate.

(b) In the case of a debt which, by reason of its being subject to any contingency or contingencies or for any other reason does not bear a certain value the Creditor shall make an estimate of its value.

(c) A Creditor shall bear the cost of proving the debt unless the court decides otherwise.

(d) Every Creditor who has lodged a proof shall be entitled to see and examine the proofs of other Creditors at a time fixed by the Executor as set out at paragraph 7 below. 

(e) A Creditor may from time to time amend or withdraw the creditor's proof and every such amendment shall be subject to the same formalities as the original proof.

6. INSPECTION OF CLAIMS

(a) The Executor must, as soon as practicable after the Closing Date, fix a period of time during which, and place where, the claims may be inspected.

(b) The Executor must give notice in writing of the period and place to the Creditors.

(c) The Executor may cause notice of the period and place to be published in any other way the Executor thinks fit.

7. OBJECTION TO CLAIM OR CLAIM FOR PREFERENCE

If a Creditor or any other interested person wishes to oppose the admission of a claim, the person must, within 14 days from the expiration of the period of time fixed under paragraph 6(a), lodge with the Executor a statement in writing setting out the grounds on which the admission of the claim is opposed.

8. PROOFS OF DEBTS TO BE EXAMINED AND ADMITTED OR REJECTED

(a) The Executor may admit or reject proof of a debt in whole or in part.

(b) Before admitting or rejecting proof of a debt the Executor shall examine the proof and any statement opposing the admission of the debt.

(c) Before admitting or rejecting proof of a debt the Executor may require further evidence in support of, or in opposition to, its admission.

(d) The Executor may reject in whole or part any claim for interest on a debt if the Executor considers the rate of interest to be extortionate.

(e) If the Executor rejects proof of a debt in whole or in part the Executor shall serve notice of rejection in the manner set out at paragraph 14 on the person who provided the proof.

(f) If the Executor rejects a statement opposing admission of a debt in whole or in part the Executor shall serve notice of rejection in the manner set out at paragraph 14 on the person who provided that statement.

(g) If a person upon whom notice has been served in accordance with paragraph  8(e) or paragraph  8(f) is dissatisfied with the decision of the Executor and wants the decision reviewed by the court he or she must, within the time set out at paragraph 9, request the Executor to apply to the court for a date to be fixed for the court to review the decision.

(h) The Executor shall comply with a request made in accordance with paragraph  8(g).

9. CONSIDERATION OF CLAIMS

(a) This paragraph applies where the Executor rejects in whole or in part:-

(i) A claim; or

(ii) A statement of opposition lodged during the time fixed pursuant to paragraph 7.

(b) The Executor must give notice of his decision to:-

(i) the person whose claim or any part of it has been rejected; or

(ii) the person whose opposition to the admission of a claim or any part of it has been rejected, as the case may be.

(c) The notice must:-

(i) specify the reason for the decision; and

(ii) inform the person to whom it relates of his or her right, under paragraph 8(g) hereof request the Executor to apply to the court to review the Executor's decision.

(d) A request under paragraph 8(g) hereof must be made within 21 days of the date of notice being given in accordance with paragraph 9(b).

(e) In order to reach such decisions the Executor may obtain such professional advice as he reasonably requires to assist him and may require any Creditor to attend upon him to answer questions and/or to provide further information and/or documentation.

10. MORATORIUM ON PROCEEDINGS BY CLAIMANTS

From the date upon which this procedure comes into effect no Creditor shall without leave of the Royal Court issue any proceedings in respect of any claim or any Claim for Preference against (a) the Executor, (b) the Estate or any of the assets therein.

11. EXECUTOR'S FEES AND EXPENSES

(a) The Executor shall be entitled to be paid and to take payment from the assets comprised in the Estate of all reasonable fees and emoluments and all costs, charges, allowances and expenses properly incurred or payable by him of and incidental to the exercise of his powers and duties under this procedure and otherwise of and incidental to the administration of the Estate.

(b) The Executor shall keep Creditors informed as to his fees and expenses as they are rendered from time to time and will provide reasonable particulars if so requested. 

12. PRESENTATION OF ESTATE ACCOUNTS

Within 15 working days following determination of all claims and all Claims for Preference, whether by the Executor or by the Royal Court, the Executor shall prepare or cause to be prepared draft accounts in respect of the Estate (the "Estate Accounts") and shall serve them on all Creditors  and issue a summons giving not less than 4 clear days notice to appear before the Royal Court to show cause why the Estate Accounts should not be approved by the Royal Court and the Executor be authorised to distribute the assets comprised in the Estate in accordance with the Estate Accounts.  The Estate Accounts shall provide for the Executor to apply and distribute the Estate in the following order of priority, in turn:-

(i) in payment of the Executor's fees; then

(ii) in payment of any Claim for preference which has been accepted; then

(iii) in payment of any Claim which has been accepted but in respect of which no Claim for preference has been made or accepted; and then

(iv) the beneficiaries under the Will

PROVIDED ALWAYS that the debts shall only be paid to the extent of the Estate, that the Estate shall be applied to meet each category of debts in turn in the order set out above (such that if there is no surplus after the payment of the debts within one category, there be no distribution to any subsequent categories), and that the debts within each category referred to in sub-paragraphs (ii), (iii) and (iv) above shall rank equally amongst themselves and shall be paid in full unless the Estate is insufficient in which case they shall abate in equal proportions.

13. LIMITATION OF LIABILITY OF EXECUTOR

The Executor shall not be liable in damages or otherwise for anything done or omitted to be done by him in the discharge or purported discharge of his duties hereunder unless it is proved to the satisfaction of the Royal Court by the person so alleging that the act or omission was made in bad faith, or with wilful default or gross negligence.  For the avoidance of doubt this limitation shall not apply to the other duties of the Executor. 

14. SERVICE OF NOTICES

A notice that is required to be served on a person under this procedure:-

(a) must be in writing; and

(b) may be sent by post to the person's usual or last known place of abode or place of business, or, in the case of a company, to its registered office or last known place of business.

15. POWER TO EXTEND AND ABRIDGE TIME

(a) The Executor may, on such terms as the Executor thinks fit, extend or abridge the period within which a person is required or authorized to do an act in pursuance of this procedure.

(b) The Executor may grant an extension although the application for the extension was not made until the expiration of the prescribed period, or any extension of that period.

16. LIBERTY TO APPLY

That the Executor and any Creditor shall have liberty to apply.